Rule of 72

In finance there are three methods for estimating an investment's doubling time. One of them is Rule of 72. The Rule of 72 provides an estimate of how the investment will grow over time and can be used as a comparison against other investment options.

The Rule of 72 is a simple, yet useful formula that can help make more informed decisions and hopefully accomplish long-term financial goals. The formula is based on dividing the number 72 by the annual yield.

For example, an investment generating an annual yield of 7%, according to the Rule of 72, takes about 10.3 years (72 ÷ 7 = 10.3) to double.

It is important to note that the Rule of 72 is an approximate calculation and not an exact forecast. Keep in mind that several other factors, such as taxes and inflation, can also affect investments.